Fam­i­ly Law | What is Super­an­nu­a­tion Split­ting in Fam­i­ly Law?

When cou­ples sep­a­rate, there is often con­fu­sion about whether super­an­nu­a­tion becomes part of the prop­er­ty pool to be divided.

The short answer is yes.

Super­an­nu­a­tion has always been seen as a dif­fer­ent kind of asset to, for exam­ple, the mat­ri­mo­ni­al home. How­ev­er changes to the law in 2002 allow the Fam­i­ly Court to treat super­an­nu­a­tion as prop­er­ty and to make bind­ing Orders for its divi­sion after separation.

The law applies to de fac­to cou­ples as well as mar­ried cou­ples, and the same prin­ci­ples apply whether it is a nego­ti­at­ed set­tle­ment or a con­test­ed hearing.

The legal reforms result­ed from the find­ings of a sur­vey by the Aus­tralian Insti­tute of Fam­i­ly Stud­ies in 1999. It was found that in more than half of cas­es involv­ing divorce and prop­er­ty divi­sion, super­an­nu­a­tion was not even con­sid­ered. In those cas­es where super­an­nu­a­tion was tak­en into account, a com­mon result of prop­er­ty set­tle­ment was that wives end­ed up with a greater share of the mat­ri­mo­ni­al home but no retire­ment income, while the hus­band kept his future super­an­nu­a­tion enti­tle­ment, but was left with­out real­is­able assets. The log­i­cal solu­tion was to empow­er judges to divide the super­an­nu­a­tion, just as they could divide mon­ey in the bank.

Valu­ing super­an­nu­a­tion for Fam­i­ly Law pur­pos­es is a spe­cialised area, how­ev­er this has become much sim­pli­fied by the pro­ce­dur­al require­ment that the par­ties sub­mit a Form 6 Super­an­nu­a­tion Infor­ma­tion request to the super­an­nu­a­tion trustee. Our Fam­i­ly Lawyers can assist with this process.

Orders that pro­vide for super­an­nu­a­tion to be divid­ed will bind each par­ty, but also bind the trustees of the super­an­nu­a­tion fund or funds. The type of Order to be made depends on whether the super­an­nu­a­tion is still accu­mu­lat­ing dur­ing the par­ty’s work­ing life, or whether a par­ty has become eli­gi­ble for pay­ment. The main types of Orders are split­ting Orders and flag­ging Orders.

Sup­pose the par­ties agree to divide their total super­an­nu­a­tion inter­ests on an equal basis. A sim­ple sce­nario is to deter­mine the val­ue of each super­an­nu­a­tion account, halve the total, and then cal­cu­late the amount that would be required to be paid by way of adjust­ment from one par­ty to the oth­er so that the par­ties are allo­cat­ed the same amount. This is then doc­u­ment­ed in pro­posed Con­sent Orders, approved by the super­an­nu­a­tion fund trustees, and then filed in the Fam­i­ly Court to be made legal­ly enforceable.

Alter­na­tive­ly, the par­ties might agree that each keeps their own super, but there is an adjust­ment pay­ment made from anoth­er source, such as joint sav­ings or shares.

Of course, many cas­es are not so sim­ple. Often there are mul­ti­ple super­an­nu­a­tion accounts, some­times of dif­fer­ent types involv­ing dif­fer­ent super­an­nu­a­tion indus­try rules (although more than 80% of Aus­tralian super is esti­mat­ed to be of the accu­mu­la­tion type). Next, even if an adjust­ment split is agreed, it may be nec­es­sary for this amount to be paid from more than one super­an­nu­a­tion account, depend­ing on the val­ue of each interest.

Depend­ing on the date of sep­a­ra­tion, there may need to be con­sid­er­a­tion of when is the appro­pri­ate date for valuation.

A fur­ther com­pli­ca­tion is whether one or both par­ties accu­mu­lat­ed super­an­nu­a­tion before the start of the rela­tion­ship, and if so, whether the pre-cohab­i­ta­tion com­po­nent should form part of the asset pool, and if so, whether that par­ty should be giv­en cred­it in the over­all prop­er­ty divi­sion for mak­ing a supe­ri­or ini­tial con­tri­bu­tion to the assets.

If you are con­sid­er­ing sep­a­rat­ing from your part­ner, it is very impor­tant to seek inde­pen­dent finan­cial advice from your accoun­tant or finan­cial advis­er in addi­tion to obtain­ing legal advice. 

At Swaab, our expe­ri­enced Fam­i­ly Lawyers will assess the par­tic­u­lar facts and cir­cum­stances of your case and then advise on the avail­able options. You will then be in a posi­tion to make an informed deci­sion about the best course of action.